EPA Regulations and Electrical System Reliability

Recently, the U.S. Environmental Protection Agency (EPA) announced that today there will be two public hearings, on the proposed carbon pollution standard for new power plants. The hearings will be all day and held in Washington DC and Chicago. Under the new rule, new power plants will have to emit no more than 1,000 tons of carbon dioxide per megawatt-hour of energy produced. All existing plants and currently permitted and built in the next 12 months will be grandfathered and exempt from this new rule for now. According to the EPA, a coal plant currently produces about 1,800 pounds of carbon dioxide per megawatt-hour of electricity. EPA says the rule creates “a path forward for new technologies to be deployed at future facilities that will allow companies to burn coal, while emitting less carbon pollution.” There is no commercially available technology for carbon sequestering that can meet this carbon standard for coal fired plants. EPA intends that carbon sequestering technology will be developed and can then be deployed on all future and existing coal burning plants or that the current crop of coal fired power plants will be the last.

The North American Electric Reliability Corporation’s, NERC, whose mission is to ensure the reliability of the North American bulk power system, recently released their 2011 Reliability Assessment. NERC develops and enforces reliability standards; assesses the projected adequacy of the power generation capacity in the United States and Canada, and educates trains and certifies industry personnel. In 2007 the U.S. Federal Energy Regulatory Commission (FERC) granted NERC the legal authority to enforce Reliability Standards with all U.S. users, owners, and operators of the bulk power system, and made compliance with those standards mandatory and enforceable.

The annual assessment of power generation capacity is intended to provide an independent view of the long term reliability of the North American power generation capacity while identifying trends, emerging issues, and concerns. NERC’s primary goal in their assessments is to make recommendations to ensure the reliability and adequacy of the electrical power supply. The most recent assessment found that the reliability of the power system remains adequate, though existing and proposed environmental regulations in the U.S. may significantly affect power system reliability. How significant an impact would depend on the scope, interpretation and timing of the rule implementation.

NERC identified potential impacts of recent environmental regulations as impacting the reliability of the U.S. power system. During the past year, EPA finalized four regulations that were specifically targeting coal fired power plants. The last was the carbon pollution standard that EPA is holding hearing for today, the others were in the news at various times throughout the past year. The Mercury and Air Toxics Standards (MATS) regulates mercury, arsenic, acid gas, nickel, selenium, and cyanide. MATS was finalized on December 21. 2011. The Cross-State Air Pollution Rule, CSAPR, which requires reductions of sulfur-dioxide and nitrogen-oxide emissions in coal fired plants, was made final in July 2011 but at the end of last year, the U.S. Court of Appeals District of Columbia Circuit granted a stay to the implementation of the CSAPR pending resolution of the legal challenges. In addition, EPA finalized the expanded Cooling Water Intake Structures Rule under Section 316(b) of the Clean Water Act that requires that National Pollutant Discharge Elimination System (NPDES) permits for facilities with cooling water intake structures ensure that the location, design, construction, and capacity of the structures reflect the best technology available to minimize harmful impacts on the environment, effectively expanding the current regulation to cover existing electrical generation facilities.

NERC 2010 Special Reliability Scenario Assessment

According to the NERC, the Cooling Water Intake Structures Rule and MATS could potentially have the most significant and negative impact on electric system reliability. The degree of impact depends on how strictly the EPA implements these and the other rules. A tight compliance schedule with limited or no flexibility could take electrical capacity out of the system and that could impact reliability. Because industry plans for complying with these rules are not yet finalized, NERC was forced under its charter to identify the potential impact based on a modeling approach that was used in the October 2010 Special Reliability Scenario Assessment to identify potential failures in the power supply. Their analysis showed that while 2013 capacity impact would be negligible it was anticipated that between 40 and 69 gigawatts of existing coal fired electrical capacity would be removed by 2018, and between 6.5 and 7.4 gigawatts of capacity would be eliminated due to the operation of the additional environmental equipment needed for compliance. This is an anticipated impact of about 3%- 7% of the total electrical system capacity which NERC warns could threaten system reliability if the regulations are implemented too quickly and too strictly. The Federal Energy Regulatory Commission now questions NERC's focus and statutory responsibilities, concluding that it "may have exceeded the functions" Congress intended for a reliability organization by evaluating electrical reliability impacts of these regulations and  other threats to the electrical capacity.

Carbon Dioxide Limit for New Power Plants

On Tuesday the US Environmental Protection Agency (EPA) proposed the first Clean Air Act standard for carbon dioxide. Under the new rule, new power plants will have to emit no more than 1,000 tons of carbon dioxide per megawatt-hour of energy produced. That standard effectively changes the fuel of choice for all future power capacity additions to natural gas, nuclear, or the renewable category (with government subsidies). All existing plants and currently permitted and built in the next 12 months will be grandfathered and exempt from this new rule. According to the EPA a coal plant currently produces about 1,800 pounds of carbon dioxide per megawatt-hour of electricity. EPA says the rule that requires new plants to produce no more than 1,000 pounds of carbon dioxide per megawatt-hour as creating “a path forward for new technologies to be deployed at future facilities that will allow companies to burn coal, while emitting less carbon pollution.” Nonsense, there is no proven commercial technology that can meet this carbon standard for coal fired plants. EPA intends that the current crop of coal fired power plants will be the last.

During the past year, EPA finalized two regulations that were specifically targeting coal fired power plants. The Mercury and Air Toxics Standards (MATS) regulates mercury, arsenic, acid gas, nickel, selenium, and cyanide. MATS was finalized on December 21. 2011. The Cross-State Air Pollution Rule, CSAPR, which requires reductions of sulfur-dioxide and nitrogen-oxide emissions in coal fired plants, was made final in July but at the end of last year, the U.S. Court of Appeals District of Columbia Circuit granted a stay to the implementation of the CSAPR pending resolution of the legal challenges. The case is scheduled to be heard in mid-April 2012. CSAPR, if eventually implemented will reduce SO2 emissions by 73% from 2005 levels and NOx emissions by 54% at the approximately 1,000 coal fired electrical generation plants in the eastern half of the country.

Our modern society requires power and the new regulation by grandfathering the existing power plants ensures that we will not be sitting in the dark any time soon. In the U.S. in 2010 over 90% of electrical power was produced by steam turbines powered by coal, oil, gas, and bio fuels. Wind and water may be used to spin the turbines as well. In 2010 Coal produced 45 % of electricity, nuclear power generated 20% of the electricity used, natural gas generated 24% of the electricity used, hydroelectric generated 6%, wind 1% and oil, wood, biomass, geothermal solar and other generated the rest. The Mercury and Air Toxics Standards and the Cross-State Air Pollution Rule will reshape the industry reducing coal fired plants. The new source carbon dioxide rule will ensure that any additional electrical capacity built will not be coal and MATS and CASPR will reduce the existing capacity of coal produced electricity. There will be impacts to the economy and our society to the reduction in demand for coal in the United States, the costs to convert, replace and upgrade power plants, and increasing the demand for natural gas which appears to be at this moment the fuel of choice.

In 2010, U.S. coal production was 1,050 million metric tons with 92.5% of the coal used to generate electricity. Without electrical generation there is little demand for coal and coal miners. The EPA’s MATS and CSPAR regulation and the greenhouse gas regulations will reduce and possibly someday eliminate the economic feasibility of coal fired electrical generation plants. However our nation requires power, and the current coal fired power plants will continue to need coal for the short term. The use of coal to generate electrical power has an interesting history. There was a time when petroleum was widely used for electrical generation. In an attempt to regain energy independence after the gas rationing and oil shortages of the 1973 Oil Embargo, the nation turned to its vast coal reserves. Between 1973 and 1976, coal production increased by 14.4%. In 1978, the Power Plant and Industrial Fuel Use Act mandated conversion of most existing oil-burning power plants to coal or natural gas. Thought the act was repealed in 1987, the impact on our nation and its economy extends to today, though the goals and values of our government have changed. Now the EPA is reshaping the future, clearly away from coal though the impacts on our environment and economy intended and any unintended are yet to be seen.

Looking at the economy as a whole and not just the electrical power sector, in 2010 the major energy sources in the United States are petroleum-gas and oil (37%), natural gas (25%), coal (21%), nuclear (9%), and renewable energy primarily biomass and hydro power generation (8%). The United States only produces about 75% of the energy we consume, the shortfall is imported petroleum. The major users of energy in the United States are heating of residential and commercial buildings (11%), industry (20%), transportation including cars, trucks, trains, planes and ships (27.4%), and electric power generation (40%).

Natural gas appears to be the current fuel of choice. It is the source of 25% of the energy consumed in the United States and in 2010 was used almost equally for industry, electrical generations and residential and commercial heating. Most, but not yet all, of the natural gas consumed in the United States is produced in the United States. Domestic natural gas production and consumption were nearly in balance through 1986, though U.S. production of natural gas peaked in 1973. From 1986 to 2006 consumption of natural gas outpaced domestic production, and imports rose. Then in 2006 U.S. production of natural gas began to increase as a result of the development of more efficient and cost effective hydraulic fracturing techniques. In 2010 natural gas production in the United States reached the highest recorded annual total since 1973 and continues to climb. Regulation and control of hydraulic fracturing will impact the cost of natural gas production in the United States, the availability of gas and the environmental impact to our natural resources.

The earth’s atmosphere is interconnected. The EPA has estimated that just one-quarter of U.S. mercury emissions from coal-burning power plants are deposited within the contiguous U.S. The remainder enters the global cycle. Conversely, current estimates are that less than half of all mercury deposition within the United States comes from American sources. Worldwide CO2 emissions are up 6%, to over 30 billion tons, in 2010 40% above the 1990 level. As you can see above the increase in CO2 emissions in the United States was far more modest, increasing 8% over 19 years. The worldwide level of CO2 is higher than the worst-case scenario outlined by climate experts just five years ago, but temperatures have not (yet) risen as projected by the climate models. The relationship of climate change to worldwide CO2 levels may not be the one assumed in the climate models. Nonetheless, the EPA continues to work diligently to achieve President Obama’s commitment in Copenhagen to reduce United States emissions of CO2 17% by 2020.

EPA and Power Generation in the US 2011

On Friday, December 30th 2011 the U.S. Court of Appeals District of Columbia Circuit granted a stay to the implementation of the EPA’s Cross-State Air Pollution Rule, CSAPR, pending resolution of the legal challenges brought by 30 parties consisting of states, utilities, unions and others that have been consolidated into a single legal challenge to this rule. The CSAPR was made final in July (and modified in October), and affects about 1,000 power plants in the eastern half of the United States. In 23 states coal fired utilities will be required to reduce annual SO2 emissions in order to reduce downwind pollution. In 25 states utilities will be required to reduce ozone season NOX emissions. The October version of CSAPR made what EPA characterized as a technical correction, but served to reduce the reduction requirements in the first two years. Nonetheless, all the impacted states were required to reduce SO2 emissions beginning in 2012. The stay prevents the implementation of these requirements today and delays these changes. The CSAPR was to replace EPA's 2005 Clean Air Interstate Rule (CAIR). The 2005 CAIR will remain in effect pending the legal resolution of the issue.

The Cross-State Air Pollution Rule (CSAPR) should not be confused with the recently finalized mercury, arsenic, and acid gas regulations, the Mercury and Air Toxics Standards (MATS). MATS regulates mercury, arsenic, acid gas, nickel, selenium, and cyanide and was finalized on December 21. 2011. That standard slashes emissions of those pollutants primarily from coal fired electrical generation plants. The Cross-State rule was also aimed at coal fired electrical generation plants, but was designed to slash smokestack emissions of SO2 and NOX that can travel into neighboring states. These pollutants react in the atmosphere to form fine particles and ground-level ozone and are transported long distances, making it difficult for other states to achieve their particle requirements under the National Ambient Air Quality Standards (NAAQS).

According to the EPA the final CSAPR rule yields $120 to $280 billion in annual health and environmental benefits, including avoiding 13,000 to 34,000 premature deaths. At an annual projected annual cost of $800 million in addition to the estimated $1.6 billion per year in capital investments already required under the 2005 CAIR. For a total annual cost of $2.4 billion dollars 240 million Americans with have cleaner air. Had the rule proceeded on schedule, EPA estimates that by 2014 CSAPR would have reduced SO2 emissions by 73% from 2005 levels and NOx emissions by 54%.

The primary impact of the new rules will be on coal-fired plants more than 40 years old that have not yet installed state-of-the-art pollution controls. Many of these plants are inefficient and will be replaced by more efficient and cleaner burning plants, probably combined cycle natural gas plants. The Edison Electric Institute, an industry trade group, claims the combined new rules will cost utilities up to $129 billion not $2.4 billion per year that the EPA estimates and eliminate one-fifth of America's coal fired electrical capacity though it is unclear what portion of that cost is associated with each rule.

Most of the electricity in the United States is produced using steam turbines. Coal is the most common fuel for generating electricity in the United States. In 2010 Coal produced 45% of electricity used in the United States, nuclear power generated 20%, natural gas generated 24%, hydroelectric generated 6%, wind 1% and oil, wood, biomass, geothermal solar and other generated the rest. If the Edison Institute is correct, 20% of the coal fired electrical capacity will be eliminated. Because 92% of coal mined in the United States is used to generate electricity, this will impact the coal mining industry. In 2010 1,085 million short tons of coal were produced in the United States, about 7.5% was exported, almost all of the rest was used to generate electricity. If the number of coal fired electrical plants is decreased by 20%, the demand for coal to produce electricity is reduced, the amount of coal mined in the United States will decrease by about 200 million short tons, the number of coal miners and employees of coal companies will decrease, fewer trains to transport the coal will be necessary, and the cost of electricity will increase (as reported by the EPA) as the electrical power industry builds new generation plants burning other fuels.

The Mercury and Air Toxics Standards and the Cross-State Air Pollution Rule appear designed to reshape the power generation industry reducing coal fired plants, but some fuel will need to be used to spin the turbines that produce electricity. The electric power sector has seen large changes in the fuel mix over the years, so this is not new. A half a century ago, nuclear energy played no role in electric power generation, but in 2010, nuclear energy provided 21% of the energy used to generate U.S. electricity. Oil provided 18% of the fuel for electric generation in 1973, but its share has declined to 1% in 2010. In the past the changes in fuel mix were accomplished often by adding, not replacing plants as the economy grew. With much slower growth in the demand for electricity, the change in fuel mix will have to be accomplished almost entirely by replacing plants.

There will be economic impacts to the reduction in demand for coal in the United States, the cost to convert, replace and upgrade power plants, and increasing the demand for natural gas. The costs for these changes will be born in the present while the benefits occur in the future with lower health care costs and higher quality of life. If the plan is to eliminate the use of coal to generate electricity, be upfront and clear about the goal, the benefits and the costs. You cannot eliminate coal without replacing that fuel with another. Natural gas from shale hydro fracking is the obvious substitute, but EPA has barely begun studying the environmental impacts from fracking. As a nation we need to decide if we intend to abandon coal and embrace fracking without fully understanding the risks associated with fracking.

EPA Mercury Air Standards and Electrical Power in the United States

On Wednesday, December 21, 2011 the U.S. EPA released the final regulation for controlling mercury, and other toxic emissions from coal fired power plants. The Mercury and Air Toxics Standards (MATS) regulates mercury, arsenic, acid gas, nickel, selenium, and cyanide. The standards will slash emissions of these pollutants primarily from coal fired electrical generation plants. This should not be confused with the Cross-State Air Pollution Rule, which requires reductions of sulfur-dioxide and nitrogen-oxide emissions in 23 Eastern and Midwestern states beginning next year, as well as seasonal ozone reductions in 28 states. Combined these two rules will have a significant impact on the future cost and availability of electrical power in the United States and should be part of a careful and well thought out and communicated environmental and energy plan for the nation.

According to the EPA it will cost $9.6 billion annually to comply with the MATS regulations and Industry analysts believe that 10% to 20% of U.S. coal-fired generating capacity will be shut down by 2016. According to the EPA, the two rules together are estimated to prevent up to 46,000 premature deaths, 540,000 asthma attacks among children, 24,500 emergency room visits and hospital admissions. “The two programs are an investment in public health that will provide a total of up to $380 billion in return to American families in the form of longer, healthier lives and reduced health care costs. “The EPA did not give an estimated combined cost of the two rules; however, the Edison Electric Institute, an industry trade group, claims the combined new rules will cost utilities up to $129 billion and eliminate one-fifth of America's coal electrical generating capacity.

In 2010 coal was used to product 45 % of electricity while oil was used to generate less than 1% of electricity, so the MSTS rule is intended for coal plants. The nation's coal-fired power plants were built as the nation grew and industrialized in the first half of the 20th century when coal was the most abundant and cheapest available fuel. With the existing power plants in place coal is still much cheaper than natural gas for generating electricity, but the tightening of regulations by EPA under the Mercury and Air Toxics Standards and the Cross-State Air Pollution Rule (even with recent modifications) will decrease that financial advantage because coal burns dirtier than natural gas. In addition, the recent availability of shale gas has lowered the cost of natural gas and provided a potentially reliable supply.

These new regulations will require existing plants to meet emission standards that are at least as stringent as the top 12% best-performing coal facilities and may force some plants to convert to natural gas fuel or to shut down entirely. The generating capacity will have to be replaced with new plants that burn cleaner fuels and produce less pollution, but the cost of power will increase. Several state utility commissioners say they fear the agency's recent rules will push up electricity prices or could even hurt electric-system reliability if too many power plants are shut down. That is countered by the EPA who states that less than 1% of the national generating capacity will be lost.
According to EPA there are about 600 power plants covered by these standards. They emit harmful pollutants including mercury, non-mercury metallic toxics, acid gases, and organic air toxics including dioxin.

Our modern society requires power - that is not going to change. The cost of power is a key factor in determining the cost of production, and the cost of living. In the U.S. in 2010 over 90% of electrical power was produced by steam turbines powered by coal, oil, gas, and bio fuels. Wind and water may be used to spin the turbines as well. Coal produced 45 % of electricity, nuclear power generated 20% of the electricity used, natural gas generated 24 % the electricity used, hydroelectric generated 6%, wind 1% and oil, wood, biomass, geothermal solar and other generated the rest. The Mercury and Air Toxics Standards and the Cross-State Air Pollution Rule will reshape the industry reducing coal fired plants, but some fuel will need to be used to spin the turbines. In all probability natural gas will be substituted for coal. There will be economic impacts to the reduction in demand for coal in the United States, the cost to convert, replace and upgrade power plants, and increasing the demand for natural gas.

Natural gas is the cleanest of the fossil fuels. Burning natural gas in the place of coal emits fewer harmful pollutants, but methane, the principle component of natural gas, is itself a potent greenhouse gas. Methane has an ability to trap heat almost 21 times more effectively than carbon dioxide. This past year researchers at Carnegie Mellon University compared greenhouse gas emissions from the Marcellus Shale region with emissions from coal used for electricity generation. The authors found that natural gas from the Marcellus shale had lower life cycle greenhouse gas emissions than coal for production of electricity by 20–50% depending upon plant efficiencies and natural gas emissions variability. Shale sourced natural gas could provide a reliable source of natural gas for our nation in this century and might make the conversion of some power generation worthwhile. However, before we push a significant portion of our electrical generating capacity from coal to natural gas, we should ensure that we will have the natural gas supplies available at the time and location that it is needed to produce a reliable electrical grid.

EPA Air Rules and Power Generation in the United States

Our modern society requires power and that is not going to change. The cost of power is a key factor in determining the cost of production, and the cost of living. Although power plants are regulated by federal and state laws to protect human health and the environment, there is a wide variation of environmental impacts associated with power generation technologies. In the U.S. natural gas is used to produce 21 % of its electricity. Coal is used to product 48 % of electricity. With the existing power plants in place coal is still much cheaper than natural gas for generating electricity, but the tightening of regulations by the EPA under the Clean Air Act of coal powered generating plants for carbon emissions, mercury, arsenic, acid gases and the Cross-State Air Pollution Rule (even with recent modifications) will decrease that financial advantage because coal burns dirtier than natural gas.

The nation's coal-fired power plants were built as the nation grew and industrialized in the first half of the 20th century when coal was the most abundant and cheapest available fuel. The coal burning power plants emit 48 tons of mercury annually as well as particulates and other pollutants. According to the EPA, Mercury can cause neurological disorders in children and the mercury emissions from power plants pose "significant hazards to public health" and must be reduced. By forcing the plants to curb emissions of mercury, arsenic and acid gases, the EPA says it can prevent as many as 17,000 premature deaths a year caused by breathing air laced with coal-fueled pollution. These new regulations will require existing plants to meet emission standards that are at least as stringent as the top 12% best-performing coal facilities and may force some plants to convert to natural gas fuel or to shut down entirely. The generating capacity will have to be replaced with new plants that burn cleaner fuels and produce less pollution, but the cost of power will increase.

The mercury, arsenic, and acid gas regulations should not be confused with the Cross-State Air Pollution Rule which is a separate set of EPA regulations, aimed at slashing smokestack emissions that can travel into neighboring states, and were recently changed to allow 10 states (notably Texas who sued the EPA), to emit more smog-causing pollution than had initially been permitted. The change will allow the 10 states to emit 76,000 tons more pollution (70,000 tons will come from Texas) or about 2% of the total pollution the EPA will regulate under this new rule. The rule is designed to decrease smokestack emissions, mostly from coal-fired power plants, in 27 states, that contribute to unhealthy air downwind and is expected to prevent up to 34,000 untimely deaths and combined with the other rules will prevent 51,000 premature deaths, but the cost in terms of increased electrical rates, jobs and lives disrupted by unemployment and diminished economic opportunity. The recent changes give more leeway to the dirtiest facilities, but the EPA explains that the change was made because it became apparent that air stack scrubbers were not as efficient as initially assumed in the EPA’s first version of the Cross-State Air Pollution Rule. Nonetheless, the primary impact of the new rules will be on coal-fired plants more than 40 years old that have not yet installed state-of-the-art pollution controls. Many of these plants are inefficient and will be replaced by more efficient combined cycle natural gas plants. Edison Electric Institute, an industry trade group, claims the combined new rules will cost utilities up to $129 billion and eliminate one-fifth of America's coal capacity.

Natural gas is the cleanest of the fossil fuels. Burning natural gas in the place of coal emits fewer harmful pollutants. Methane, the principle component of natural gas, is itself a potent greenhouse gas. Methane has an ability to trap heat almost 21 times more effectively than carbon dioxide. This year researchers at Carnegie Mellon University compared greenhouse gas emissions from the Marcellus Shale region with emissions from coal used for electricity generation. The authors found that natural gas from the Marcellus shale had lower life cycle greenhouse gas emissions than coal for production of electricity by 20–50% depending upon plant efficiencies and natural gas emissions variability. Shale sourced natural gas could provide a reliable source of natural gas for our nation in this century and might make the conversion of some power generation worthwhile. However we need to remember that the gas still is a limited resource and be cautious about what other impacts fracking might have on our other resources especially water. At least in the medium term the environmental impact from power generation will be determined by the efficiency and care of how fuel is obtained, transported, generated and used. Improving efficiency is the low lying fruit that can have an immense impact and should not be ignored while we are busy dreaming of the someday world of renewable energy. Natural gas from shale rock is plentiful in North America. Despite billions of dollars in DOE solar generation loan guarantees the generating capacity of solar power in the nation will continue to be under 3% of power generation.